A stock index currently stands at 350. The risk-free interest rate is 8% per annum (with continuous compounding) and the dividend yield on the index is 4% per annum. What should the futures price for a four-month contract be?

• a)$352.7
• b)$351.7
• c)$357.7
• d)$354.7

For non-dividend paying stock index, the current price is 1100 and the 6-month forward price is 1150. Assume the price of the stock index in 6 months will be 1210. Which of the following is true regarding forward positions in the stock index?

• a)Long position gains 50
• b)Long position gains 60
• c)Long position gains 110
• d)Short position gains 60

A one-year forward contract on a stock has a price of $75. The stock is expected to pay a dividend of $1.50 at two future times, six months from now and one year from now, and the annual effective risk-free interest rate is 6%. Calculate the current stock price. [Hint: use discrete compounding]

• a)75.81
• b)73.63
• c)70.75
• d)77.87